Gang violence is thought to be the reason for the shooting in Stockwell. Photograph: Cliff Hide/London News Pictures

Escalating gang violence is being blamed for the shooting of a five-year-old girl who was struck in the chest by a bullet when teenagers on bicycles sprayed a south London shop with gunfire as they tried to kill their rivals.

The child and a 35-year-old man who was shot in the face were both in a critical condition.

Community sources say the area, Stockwell in the borough of Lambeth, has been plagued by youth gang violence that has spiked in recent months. police introduced hardline section 60 stop-and-search powers covering a large swath of the borough, meaning they can search somebody without suspecting an offence has been committed.

The girl, believed to be the youngest shooting victim in recent years, was visiting the shop with her family when the shots were fired just after 9pm on Tuesday. Both victims have Sri Lankan heritage. Police say the 35-year-old man lived above the shop but did not work there.

The child's family were believed to have been visiting relatives who work at the shop.

Police say two youths ran into the Stockwell Food and Wine shop seeking shelter from three youths pursuing them on bicycles. One opened fire, shooting into the shop with handguns, it is believed, and then fled.

Kirubakaran Nantheesparan, a family friend of the shop owners, saw the lead-up to, and aftermath of, the shooting. "They were screaming at each other and throwing bottles," he said. "Then I saw one pull out a gun and fire the shots. I saw the gun right next to me. I heard the shots fired and we all backed down.

At first we thought they had been hit by bottles but there was too much blood. " We didn't know that the girl had been shot. She was lying down in the shop in shock.

The girl was lying on the ground and the mum ran over to her. She screamed 'Call the police, call the police'; there was so much blood."

Mareh Silva, 34, who was coming out of the shop, said she saw three boys, aged between 14 and 17, drop their bikes outside. She said their faces were covered with black scarves and balaclavas and she could only see their eyes as they ran into the shop. "I looked in and saw a lot of blood on the floor but I didn't want to look at what had happened; I was very scared."

Detective Chief Inspector Tony Boughton urged the intended targets to come forward: "They are an important part in helping us understand exactly what was happening and should be able to direct us to those responsible."

A youth worker, who gave only the name Jason, said one of the targets was an 18-year-old man he knew. "It's just fights and retaliation. It's nothing to do with drugs. It's a back-and-forth dispute."

Community sources said the viciousness of the gang wars was shown by an incident last Thursday when a 16-year-old was stabbed in daylight in Brixton by up to 10 youths. The victim was wearing a stab vest and his attackers had plunged the knife into him about 20 times.

The three gangs involved in the violence in Lambeth include one called the GAS gang and another known as AMD.

Lee Jasper, an adviser on policing to former London mayor Ken Livingstone, said: "Lambeth is in the grip of a vicious gang war between three gangs. Every week there are casualties. This tragedy is the latest of a series of vicious attacks over the last month. Attempting to tackle this issue through enforcement alone will not work. That's been the main strategic approach of the last three years and we are still seeing a rise in youth violence, violence generally."

Figures for Lambeth show increases in knife and gun crime, as well as in serious youth violence, according police figures for the year to April 2010.